Market Update: China Cuts REE Export Quotas by 27 Percent

China has issued its first batch of rare earth export quotas for 2013, and the total comes in 27 percent lower than the first round of quotas issued in 2012.

The Ministry of Commerce announced today that 15,499 tonnes of rare earths will be allowed to leave the country, which includes 13,561 tonnes of light rare earths and 1,938 tonnes of heavies. The first-lot quota for 2012 was 21,226 tonnes, Taipei Times reported.

China issues REE quotas in two batches. The second batch for 2012 totalled 9,770 tonnes, bringing the full-year quota to 30,996 tonnes, the highest in three years, states The Times.

In November China’s Ministry of Commerce released standards and application procedures for its rare earth sector – stating that only companies that exported material between 2009 and 2011 are eligible to apply for the new export quotas.

It also confirmed that REE producers will need to undergo and pass an environmental inspection by China’s Ministry of Environmental Protection to be eligible, and that raw materials will need to have originated from licensed rare earth mines.

China’s export restrictions on rare earths have led to complaints by the world’s major users, including China and Japan, that the restrictions breach global commerce rules. In July the World Trade Organization agreed to probe China’s export limits and tariffs for REEs.

Meanwhile, partly as a response to falling rare earth prices and partly to curb widespread environmental degradation from polluting rare earth mines, the Chinese government announced earlier this year it plans to shut down 20 percent of rare earth production.

In October, Inner Mongolia Baotou Steel Rare-Earth, a unit of Baotou Steel Rare Earth Group (SSE:600111), China’s leading rare earth producer, halted production at some of its smelting and separation operations. The move was seen both as a way to curb falling prices and to improve the financial position of the company which saw its profits plunge 90 percent in the third quarter due to waning customer demand and weak prices.

The shutdowns have had some impact on rare earth exports. Declining demand from the world’s major rare earth customers, operating in a slowed economic climate, have also played a part. Taipei Times reports that “shipments from China fell 3.1 percent to 13,014 tonnes in the first 11 months of this year because of substitution and declining overseas demand.”